McLean v Adelaide Bank Limited

[2009] FCA 1004

FEDERAL COURT OF AUSTRALIA

McLean v Adelaide Bank Limited [2009] FCA 1004

SHONA DIMITY MCLEAN v ADELAIDE BANK LIMITED, WESTPAC BANKING CORPORATION, RAMS WESTPAC BANKING CORPORATION, ST GEORGE WESTPAC BANKING CORPORATION and PERMANENT CUSTODIANS

WAD 147 of 2009

SIOPIS J
27 AUGUST 2009
PERTH

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION	WAD 147 of 2009

BETWEEN:

SHONA DIMITY MCLEAN
Applicant

AND:

ADELAIDE BANK LIMITED
First Respondent

WESTPAC BANKING CORPORATION
Second Respondent

RAMS WESTPAC BANKING CORPORATION
Third Respondent

ST GEORGE WESTPAC BANKING CORPORATION
Fourth Respondent

PERMANENT CUSTODIANS
Fifth Respondent

JUDGE:	SIOPIS J
DATE OF ORDER:	27 AUGUST 2009
WHERE MADE:	PERTH

THE COURT ORDERS THAT:

1.The applicant’s claim for interlocutory relief is dismissed.

2.Costs are reserved.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

The text of entered orders can be located using eSearch on the Court’s website.

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION	WAD 147 of 2009

BETWEEN:

SHONA DIMITY MCLEAN
Applicant

AND:

ADELAIDE BANK LIMITED
First Respondent

WESTPAC BANKING CORPORATION
Second Respondent

RAMS WESTPAC BANKING CORPORATION
Third Respondent

ST GEORGE WESTPAC BANKING CORPORATION
Fourth Respondent

PERMANENT CUSTODIANS
Fifth Respondent

JUDGE:	SIOPIS J
DATE:	27 AUGUST 2009
PLACE:	PERTH

REASONS FOR JUDGMENT

1. This is an application for an urgent injunction brought by the applicant, Ms Shona Dimity McLean, a property investor, to enjoin the sale of a property at 18 Ewen Street, Scarborough, which is due to take place at 1 pm on 29 August 2009.  The respondent to this interlocutory application is the Adelaide Bank Limited.  Ms McLean is the owner of the property.  The Adelaide Bank has a mortgage over the property and has given instructions to a real estate agent to sell the property pursuant to its power of sale under the mortgage.

2. The originating application dated 25 August 2008, which has been filed by Ms McLean has only, at this stage, been served on the first respondent, the Adelaide Bank.  I take it, although I do not have any evidence to that effect, that the other four respondents to the originating application have mortgages over one or more of the other properties identified by Ms McLean as being owned by her, and that these four respondents are also threatening to exercise their rights as mortgagees (but not imminently) in respect of the properties owned by Ms McLean.

3. The grounds of Ms McLean’s claims against the five respondents are set out in her originating application.  They are the following:

   1.Since 2001, the conduct of banking in Australia has been regulated by the Australian Securities and Exchange Commission Act 2001, (CTH).

   2.Although a Mortgage contains an attornment clause, and the Mortgage purports to grant the right to take possession of land and sell it quickly, this is State legislation, and where it is in conflict with the provisions of a Federal Act to a State Act must give way to that relevant Act.

   3.An Equity of Redemption was accepted as existing in the case Barns V the Queensland National Bank (1906) 3 CLR 925, and it is beyond the competence after 1900 of a State Government to legislate to abolish that equity given the nature of a federated State.

   4.The Provisions of 12CA (Appendix B1) and 12CB (Appendix B2) of the Australian Securities and Exchange Commission Act 2001, (CTH) make unconscionable conduct by a financial corporation illegal, and to use a State Act to defeat an equity owned by the applicant in Commonwealth property, owned in root or radical title by The Commonwealth Sovereign, is unconscionable conduct.

   5.This Honourable Court has power under S 12GD Australian Securities and Exchange Commission Act 2001, (Cth) to issue an injunction.

4. Ms McLean seeks in the originating application an order restraining the named respondents from taking possession and selling the mortgaged properties for 12 months, “but securing the proceeds of any sale effected within that time, to pay the secured amounts to the Mortgagee”.

5. The interlocutory relief sought in this application is for an interlocutory injunction restraining the Adelaide Bank “from taking possession, until 12 months have elapsed, and then only if they have not been paid in full or other arrangements made”.

6. When the matter came before me yesterday for the first hearing, I adjourned the matter to give Ms McLean an opportunity to put evidence before me in support of her application.  I also asked Ms McLean to notify the Adelaide Bank of the adjourned hearing.

7. Ms McLean has today filed a document headed “statement of facts”.  The statement of facts was witnessed by a justice of the peace.  The statement of facts states that Ms McLean has assets which exceed her liabilities by $1.2 million.  She also says that she had a disagreement with the Stirling City Council that prevented her from conducting her business without interference.  As a result, her name entered the list of defaulters maintained by the credit bureau.  As a direct result of the disagreement, Ms McLean says that her cash‑flow regime was disrupted and she fell behind in repayments.

8. Ms McLean then says that without personal service upon her of any court process whatsoever, the Adelaide Bank proceeded to appoint an agent and “wants to proceed and sell the properties the subject of a Mortgage to them, on…29 August 2009”.  This, says Ms McLean, will cause her great distress unless at least $1.045 million is realised at the auction.  Ms McLean says that she has good reason to believe that within a reasonable time she can achieve that price.  Ms McLean says that her repayments are in arrears and that she needs time to reorganise her portfolio of properties.

9. Ms McLean goes on to say that the rights of the Adelaide Bank were being “exercised subject to some State law of which I have had no notice”, and that she acted with due diligence at the first opportunity to do so upon becoming aware of the Adelaide Bank’s intention to sell her property, without further reference to her or an opportunity for her to set a reserve price. This, says Ms McLean, is unconscionable conduct under s 12CB of the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act).

10. Aside from a letter to the Adelaide Bank and advertisements for the sale of two properties, there was no other documentary evidence which was provided by Ms McLean in support of her application.  Thus, I do not have a copy of the mortgage in front of me.

11. At the hearing today before me, Mr Diamond appeared for the Adelaide Bank.

12. Mr Diamond gave viva voce evidence from the witness box.  He deposed that he is a solicitor who was instructed by the Adelaide Bank to issue a default notice under the mortgage in respect of each of the Scarborough property and another property.  He said that he had drafted default notices under the Transfer of Land Act 1893 (WA) (the TLA) and sent them by registered mail to Mr Mason, Ms McLean’s agent, in accordance with a written authority executed by Ms McLean appointing Mr Mason her agent. Mr Diamond said that he had examined the written authority from Ms McLean appointing Mr Mason the agent, before sending the notices of default. Mr Diamond went on to say that there had been no payments made in response to the notices of default. Ms McLean agreed in evidence that she had appointed an agent before the notices of default were issued by Mr Diamond on behalf the Adelaide Bank.

13. Ms McLean also gave viva voce evidence.  However, there was no affidavit before the Court from Ms McLean’s agent, Mr Mason.

14. Mr Diamond’s evidence is quite consistent with the evidence of Ms McLean that she did not receive any notice, but that is because she had appointed an agent for that purpose.

15. The principles to be applied are those which are set out in the following observations of Gummow and Hayne JJ in Australian Broadcasting Commission v O’Neill (2006) 227 CLR 57 at 81-82, at [65]:

    The relevant principles in Australia are those explained in Beecham Group Ltd v Bristol Laboratories Pty Ltd.  This Court (Kitto, Taylor, Menzies and Owen JJ) said that on such applications the court addresses itself to two main inquiries and continued:

    The first is whether the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief…The second inquiry is…whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the defendant would suffer if an injunction were granted.

    By using the phrase “prima facie case”, their Honours did not mean that the plaintiff must show that it is more probable than not that at trial the plaintiff will succeed; it is sufficient that the plaintiff show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial.  That this was the sense in which the Court was referring to the notion of a prima facie case is apparent from an observation to that effect made by Kitto J in the course of argument.  With reference to the first inquiry, the Court continued, in a statement of central importance for this appeal:

    How strong the probability needs to be depends, no doubt, upon the nature of the rights [the plaintiff] asserts and the practical consequences likely to flow from the order he seeks.

    (Footnotes omitted.)

16. It is now necessary to consider Ms McLean’s prospects of succeeding at trial in respect of the three causes of action which I have discerned from the submissions and statements which Ms McLean has made to me.  I have sought to articulate these causes of action as best I can.

17. The first cause of action which I understand Ms McLean to raise, is founded on a constitutional argument.  I construe Ms McLean to contend that the powers which are given to mortgagees under the TLA and the Property Law Act 1969 (WA) are inconsistent with the provisions of s 12CA and s 12CB of the ASIC Act. The consequence, as I understand Ms McLean’s argument, is that by reason of s 109 of the Constitution, the State legislation, pursuant to which the Adelaide Bank has acted, is invalid, with further consequence that it has no entitlement to sell the property.

18. In my view, Ms McLean’s contention is weak. The provisions of the State Acts do not engage at all with the unconscionability provisions of the ASIC Act. Each State Act, if valid, would not alter, impair or detract from the operation of the Commonwealth Act because it is quite possible for the provisions of the Commonwealth Act to have effect in circumstances where a mortgagee exercises the various powers provided for in the State Acts, when the circumstances warrant it.

19. It follows that the prospects of success of Ms McLean’s claim on the constitutional contention are not sufficiently strong to warrant the grant of the interlocutory injunction sought.

20. The second cause of action appears to be founded on the contention that the Adelaide Bank has acted unconscionably in contravention of the ASIC Act in taking possession of the property and purporting to exercise its power of sale.

21. In oral evidence, Ms McLean says that she had tried to make some alternative arrangements to sell the property in order to discharge the debt due to the Adelaide Bank but was unable to do so.

22. Further, Ms McLean says that she would suffer distress if the Adelaide Bank sold the property now rather than in 12 months time, because she believed she could obtain a better price for the property within that period.  It was accepted by Ms McLean that the mortgage has been in default for some time.  In my view, the evidence does not make out even an arguable case that the Adelaide Bank in seeking to exercise its rights under its mortgage, has acted, or threatens to act, unconscionably.

23. On that basis, I find that there is an insufficiently strong case to support the giving of any injunctive relief on the basis of this cause of action.

24. I note that during argument Mr Diamond observed that the provisions of the ASIC Act referred to by Ms McLean, might not actually even apply to the Adelaide Bank in the circumstances of this case. However, in light of my findings I do not need to make findings on that contention.

25. The last cause of action is founded on Ms McLean’s contention that the Adelaide Bank did not give Ms McLean notice or obtain an order for possession.  As I have said, Mr Diamond who was not cross‑examined by Ms McLean, deposed that a default notice under the TLA was mailed to Ms McLean’s agent.  Ms McLean’s evidence that she did not receive the default notice is consistent with the evidence of Mr Diamond, in that she accepts that she appointed the agent before the notice of default was issued.  There was, as I have also said, no evidence from Mr Mason, Ms McLean’s agent.

26. Ms McLean has failed to put any evidence before me which supports a contention that the Adelaide Bank has failed to comply with the terms of the mortgage or the statutory provisions, or otherwise acted unlawfully, in seeking to exercise its power of sale.  Such evidence as there is, is from Mr Diamond, and is to the contrary effect.

27. In those circumstances, Ms McLean’s contention in support of the third cause of action does not, in my view, raise a sufficiently strong case to justify the granting of the interlocutory injunction sought.

28. In light of my findings that Ms McLean has not made out a case which has sufficiently strong prospects of succeeding at trial to justify the making of the interlocutory injunction sought, there is no need to consider the balance of convenience.

29. However, the balance of convenience would, in any event, not have favoured Ms McLean.

30. First, the undertaking for damages given by Ms McLean is not in a proper form and does not undertake to compensate the Adelaide Bank and any party for losses which might be incurred if the Adelaide Bank was enjoined from selling the property, and Ms McLean was to lose at trial.  Further, it is accepted that Ms McLean is in default on a number of mortgages and, therefore, there is a serious question as to whether she would be able to meet an undertaking for damages if she was to prevent the sale from proceeding and an aggrieved party was to claim on the undertaking, if she was to lose at trial.

31. Secondly, the property is an investment property and is vacant land.  Ms McLean would be able to recover compensation if she was able to establish that the property was sold unlawfully by the Adelaide Bank and she has thereby suffered a loss.  I note, however, that Ms McLean would need to give consideration to amending her application to formulate her claims with greater precision.

32. For those reasons, I dismiss Ms McLean’s application for interlocutory relief.

I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis.

Associate:
Dated:        3 September 2009

Counsel for the Applicant:	The Applicant appeared in person.
Counsel for the First Respondent:	Mr M Diamond
Solicitor for the First Respondent:	CWS Lawyers

Date of Hearing:	27 August 2009
Date of Judgment:	27 August 2009